The PtP Beat Goes On: “How to Apply PtP to State-Owned Enterprises” by William L. Megginson and Lester M. Salamon

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Governments around the world have recently been involved in a significant new wave of privatizations-sales of state-owned enterprises to private companies. The 48-month period between January 2013 and December 2016 saw governments raise more money through privatization sales than during any comparable previous period. Yet three times worth of government enterprises than the $3.5 trillion sold since 1977 still remain in government hands, many of them awaiting sale.

What happens to the vast resources secured through such sales? Too often, it is difficult to determine. Stories of widespread corruption are rampant. Even when the proceeds are appropriately channeled into government budgets, however, their uses are hard to track. But these are the people’s assets, often the only real assets a population has. Surely a case can be made for handling them more responsibly and ensuring that citizens get a clearer benefit from their use. This is especially so given what is often the “upside-down” effects such asset sales can produce-yielding positive economic benefits for companies and citizens that are often long in coming and too dispersed to be clearly felt; while producing immediate harms in the form of lost jobs and community disruptions that hit quickly and are highly concentrated.

No wonder the bloom is off the rose of traditional privatization of state-owned enterprises, yielding considerable push-back from citizens in widely disparate locales.

Fortunately, there is a way to overcome these problems. In many parts of the world, governments and companies have adopted an approach that we call “Philanthropication thru Privatization,” to the privatization of state-owned enterprises (SOEs). In this approach, all or a significant portion of the proceeds of sales of SOEs are placed in one or more charitable foundations governed by reliable and independent citizen boards and used to promote visible priority projects of general benefit to a country’s citizens. This is how the Volkswagen Foundation in Germany, the la Scala Foundation in Italy, the Polish Science Foundation, the network of endowed Czech foundations, the German Environmental Foundation, and many others have been created around the world.

Now the Philanthropication thru Privatization (PtP) Project directed by Johns Hopkins University Professor Dr. Lester M. Salamon and administered through the East-West Management Institute of New York, is working to promote this concept as a better way to handle the assets thrown up by such SOE sales in a more transparent, and citizen-benefiting, manner.

The booklet being released today, “How to Apply PtP to State-Owned Enterprises” is one in a series of How-To Booklets being prepared by this Project to inform citizens, companies, and governments about the win-win-win outcomes that the PtP concept can generate. The How-to Booklet on the privatization of SOEs has been prepared by privatization expert Dr. William L. Megginson, Professor and Price Chair in Finance at the University of Oklahoma’s Michael F. Price College of Business and PtP Project Director Dr. Lester M. Salamon, director of the Johns Hopkins Center for Civil Society Studies. The booklet provides a step-by-step guide to the process of privatization of state-owned enterprises, and advice on how PtP advocates can bring the PtP concept to the SOE privatization process in their communities, and the “win-win-win” outcomes that can result for citizens, companies, and governments.

About the PtP Project | email
The Philanthropication thru Privatization (PtP) Project seeks to document and promote the further adoption of an option for the creation of independent charitable foundations around the world by capturing all or a portion of an assortment of transactions involving the transformation of public or quasi-public assets into private wealth. The PtP Project is directed by Dr. Lester M. Salamon, a professor at the Johns Hopkins University and director of the Johns Hopkins Center for Civil Society Studies (CCSS). Administrative and technical support for the Project is provided by the East-West Management Institute (EWMI) with generous support from the Volkswagen, Charles Stewart Mott, Ford, la Caixa, and King Baudouin foundations as well as eight Italian foundations of banking origin through their Association of Italian Foundations and Savings Banks (ACRI). For more information about the PtP Project, visit p-t-p.org.

About William L. Megginson | email
Bill Megginson is Professor and Price Chair in Finance at the University of Oklahoma’s Michael F. Price College of Business. He is also the Saudi Aramco Chair Professor in Finance at King Fahd University of Petroleum and Minerals in Dhahran, Saudi Arabia. He has served as a privatization consultant for the New York Stock Exchange, the OECD, the IMF, the World Federation of Exchanges, and the World Bank..

About Lester M. Salamon | emailDr. Lester M. Salamon is a Professor at The Johns Hopkins University and the Director of the Johns Hopkins Center for Civil Society Studies and of the Philanthropication thru Privatization Project. The author or editor of over 25 books on the tools of government and the global civil society sector, Dr. Salamon previously served as Deputy Associate Director of the U.S. Office of Management and Budget in the Office of the U.S. President.